BASICS
A house property can be anything which is attached to the land and it can be your house, your office, or can be a shop and also can be a building. The income tax does not distinguish between any of your commercial place or your house where you stay. All the properties are taxed under this head. An owner is a legal owner for objective of the income tax, owner is someone who can make use of every rights of the owner and the right should not be use of on someone’s behalf.
If the property is being used for any kind of business then it shall be taxed under the head of 'Income from Business and Profession'.
There can be following types of house property:
1. Self-occupied property
If someone is using the property for their own personal residential purpose then it can be known as Self-occupied property. This property can be occupied by any of the family member of the tax payer. It can be his or her spouse/parents and children. Even if the property is vacant then too it will be considered as a self-occupied property of the purpose of income tax act.
2. Let out house property
If the house is given on rent for whole year or any of the part of the year then it will be known as Let out House Property.
3. Inherited Property
An inherited property is a property which is hand down from parents or grandparents, it can be either self-occupied property or let out house property.
HOW TO CALCULATE?
- Step 1: Calculate GAV (Gross Annual Value) of the property.
- Step 2: Decrease Property Tax (When paid).
- Step 3: Find Out Net Annual Value.
- Step 4: Decrease 30% of NAV regarding standard deduction.
- Step 5: Decrease Home Loan Interest (Section 24).
- Step 6: Find out Income from house property.
DEDUCTION ON HOME LOANS
1. SECTION 24
If the house property is self-occupied then the owner can claim up to Rs 2 Lakh on the loan interest as a deduction. This will be also applicable is the house is vacant. If the owner has rented out the property then the entire amount of home loan interest will be allow for deduction.
The amount of Rs 2 lakh will be replaced to Rs 30,000 if any of the following condition are satisfied:
Condition 1:
- If the loan is taken on or after 1st April 1999,
- If the construction or purchase is not completed within 5 years from when the loan was taken.
Condition 2:
- The loan is taken for repairs or renewal and was taken on or after 1st April 1999.
2. DEDUCTION ON PRINCIPAL REPAYMENT
The deduction is limited to Rs 1,50,000 under Section 80C. Condition for claiming deduction under this section is as follows:
- The loan shall be taken for purchase or construction for new property,
- The property shall not be sold off within 5 years from when you took the possession.
3. DEDUCTION UNDER SECTION 80EE
Tax benefit under this section is up to Rs 50,000.
4. DEDUCTION UNDER SECTION 80EEA
If the taxpayer is claiming deduction under Section 80EEA then he will be not eligible for deduction under Section 80EE. This section was added to extend the deduction of interest and for the tax benefit for loan taken during 1 April 2019 to 31 March 2020. Tax benefit under this section is up to Rs 1,50,000.
Authored by Adv Shivam Kumar
CAclubindia
